UNITED STATES v. WESTERN ELEC. CO.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

March 23, 1984

United States of America, Plaintiff
v.
Western Electric Company, Inc., and American Telephone and Telegraph Company, Defendants. United States of America, Plaintiff v. American Telephone and Telegraph Company, et al., Defendants

Coinless public telephones have been in use for some time at locations such as airports, hotels, and truck-stops. The Operating Companies themselves own "Charge-a-Call" coinless public telephones which can be used for credit card, collect, and other similar calls.
*fn2"
Interexchange carriers have recently begun to install their own coinless public telephones.
*fn3"
AT&T has installed such telephones in a number of places around the country,
*fn4"
but when it sought to install them in several locations in California,
*fn5"
Pacific Bell refused to provide the necessary access lines.
*fn6"

It is AT&T's position that Pacific Bell is required by the decree to furnish it with the required access; Pacific Bell, on the other hand, claims that this is a matter over which the California Public Utilities Commission has jurisdiction, and that it will not provide the necessary access to AT&T unless it is instructed to do so by the Commission.
*fn7"

II

The decree requires
*fn8"
the Operating Companies to grant nondiscriminatory exchange access to all interexchange carriers.
*fn9"
That provision was designed to make it impossible for a "bottleneck" monopoly to prevent competitors from providing service by refusing to provide the necessary connections. If such an entity; i.e., an Operating Company, had the authority to determine when it would or would not provide access and to whom, it would become the arbiter of future inter-LATA services; it could shape the inter-LATA competition to suit its needs or interests; and it could frustrate such competition altogether.
*fn10"
In short, it could act as the Bell System was alleged to have acted prior to divestiture.

Pacific Bell's assertions of authority to refuse to grant access to its lines to AT&T thus not only violate the decree; they strike at its heart. As will now be explained, the procedural and other defenses asserted by Pacific Bell and by others with respect to the extraordinary action of this Operating Company
*fn11"
are entirely unpersuasive.

Pacific Bell asserts that jurisdiction with respect to the coinless telephone issue lies with the California regulatory commission because that issue raises many public interest problems -- problems which the California regulatory authorities are claimed to be in the best position to resolve. In fact, according to those supporting Pacific Bell,
*fn12"
this Court has recognized that disputes such as this should be decided, at least initially, by local regulators.

Congress determined by its enactment of the Sherman Act that the public interest lies in the removal of artificial restraints on competition, and that congressional direction was given content for purposes of this litigation by the decree which requires Pacific Bell to provide nondiscriminatory access. Under the Supremacy Clause
*fn13"
local jurisdictional and other interests must, of course, give way.

Substantively, too, the California public interest argument is not well taken. The refusal of bottleneck monopolies to provide the necessary connections potentially stifles competition, and for that reason alone it cannot be said to be in the public interest. As the Airport Operators Council International correctly points out, if Pacific Bell is not required to provide access, the result could be, inter alia, to emasculate the growth of competitive interexchange facilities at airports; to hold back the development of innovative long distance telephone facilities and service; and otherwise to deprive the public of benefits. Memorandum at 2.

It is contended by some that the proliferation of exclusive access telephones would be confusing to the public and would for that reason not be in the public interest.
*fn16"
There is no doubt that some find confusion in the mushrooming of service and equipment options that have become available in the wake of divestiture; others may regard such proliferation as healthy in that they give the consumer greater choice at potentially lower prices. In any event, that policy dispute, too, is resolved by the antitrust laws and the decree.

AT&T has claimed, without contradiction, that it plans to provide the public with new and improved features and conveniences, and that these will give consumers the ability, among others, to charge calls simply by the insertion of magnetically-encoded cards,
*fn17"
to use American Express cards for telephone charging purposes, and, if they are non-English speaking, to take advantage of multilingual instructions. MCI, among others, has been similarly forward-looking in its planning. Such innovation is in the public interest; it is the type of advance that the decree is designed to foster.

III

Pacific Bell and those who support its position argue that the number of favorably situated locations for public telephones is limited; that companies other than AT&T may not be ready to install their own coinless telephones; that if these companies were ready, the several stations would quickly take up the limited space available at the high-density locations that are at issue here; and that Pacific Bell must therefore have the authority to decide not only when and for whom to allow interconnection but also to prohibit all interconnection except that which may be achieved through "universal" public terminals.
*fn18"

Some of these contentions are based on premises which are unproved and other claims are likely to be erroneous. It is entirely unclear, for example, whether space at the vast Los Angeles Airport or the Olympic grounds is at such a premium that the several interexchange carriers could not all be accommodated. Similarly in error is the argument advanced by Pacific Bell and GTE Sprint that if AT&T receives access, it will "tie up" all available locations with its own stations. As AT&T points out, there are more than 1.5 million public telephones in place nationwide, all of them owned by the Operating Companies, and all of them available for service by and to any interexchange carrier. As for specific locations, the AT&T contracts are nonexclusive and may be terminated without penalty at any time upon sixty days' notice. AT&T Reply Memorandum at 6 n.*. Indeed, if anyone has an entrenched advantage and is likely to tie up the prime locations, it is Pacific Bell which already has public telephones, including Charge-a-Call telephones, in most of the locations.
*fn19"

As for Pacific Bell's alternative claim -- that AT&T should not be given access because others may not be ready with their own coinless telephones -- it is without merit as a matter of law. To the extent that it appeared desirable to "hold back" AT&T because of its dominance in the interexchange and information markets, the decree contains provisions to accomplish just that.
*fn20"
State or local regulatory commissions do not have the authority to add to those restrictions on the basis of their own notions in that regard.

It may turn out ultimately that provision will have to be made in some locations, for space reasons or otherwise, to limit the number of coinless stations. If and when that contingency arises, remedies will readily be available to deal with this problem.
*fn21"
However, the issues regarding such remedies are not ripe for decision now. What is clear at this time is that Pacific Bell, which is bound by the decree,
*fn22"
must comply with its terms. It may not evade that responsibility by the expedient of seeking, awaiting, or relying on "instruction" from a regulatory commission, and and such body may issue orders or directions which would interfere with the decree. AT&T's motion will therefore be granted. The Court is this date issuing an appropriate order.
*fn23"

ORDER

Upon consideration of AT&T's motion to compel compliance with the decree, and the various briefs and memoranda filed in opposition and in support thereof, and the entire record herein, it is this 2nd day of March, 1984, in accordance with a Memorandum filed this date,

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